hitachi to make hitachi high-technologies a wholly owned ... · measurement and analysis...

© Hitachi, Ltd. 2020. All rights reserved.

Hitachi to Make Hitachi High-Technologies

a Wholly Owned Subsidiary

January 31, 2020

Keiji KojimaExecutive Vice President and Executive Officer

Hitachi, Ltd.

© Hitachi, Ltd. 2020. All rights reserved. 1

Aiming to improve the Quality of Life and add values for

customers through increase in the social, environmental, and

economic values by five-sector business and technology solutions

Strengthening Lumada by firmly establishing a measuring and

analysis platform as a part of 2.0~2.5 trillion yen investments for

the growth set out in 2021 Mid-term Management Plan

Achieving the entire Hitachi Group’s growth through

transformation by digital & services

Key Messages Today


Achieving a sustainable society through the

‘Social Innovation Business’


Social

values

Environmental

values

Economic

values

Hitachi will create:


Capability to connect the cyber and physical spaces

and make them interact mutually,

where professional knowledge and experiences

matter most

What capabilities does

Social Innovation Business need?

3© Hitachi, Ltd. 2020. All rights reserved.

The ability to “observe, measure, and analyze” a vast amount of

data is becoming more important amid the accelerating

digitalization of all industries

4© Hitachi, Ltd. 2020. All rights reserved.


Strategic Rationale in 2021 Mid-term Management Plan

Improving the QoL ・ Adding values for customers

Social values Economic valuesEnvironmental

values

Mobility

solution

Smart Life

solution

Industry

solutionEnergy

solution

IT

solution

Strengthening Lumada through establishing a measuring and analysis platform

Transforming the business portfolio and expanding solutions

in healthcare and industrial areas

Firmly establishing a measuring and analysis platform by

integrating digital technologies with measurement and analysis technologies

Accelerating the Social Innovation Business growth by utilizing

measurement and analysis technologies of Hitachi High-Tech*

5

* Hitachi High-Technologies is abbreviated to “Hitachi High-Tech” throughout the presentation

QoL: Quality of Life


Improvement of

Social,

Environmental, and

Economic values

Global Market Size*

~US$30B

Expanding Growth Opportunities through Integrated Management

Strengthening collaboration with Mobility and Industry field・ Enhancing social infrastructure (transportation and smart city etc.)

・ Improving development and production capabilities in various industries

Expanding into the healthcare analytics field

・ Providing analysis platform and services to insurers and medical institutions,

by leveraging Hitachi High-Tech’s strength of testing laboratory in the U.S.

* Hitachi’s estimates, as of 2025


Strategic Rationale

Strengthening Healthcare Business

・ Cultivating in-vitro diagnostics business of Hitachi High-Tech

as a core business (No.1, globally)

・ Expanding into the healthcare analytics field

Utilizing Hitachi High-Tech’s human resources and strengthening

global procurement functions

Strengthening Lumada

・ Integrating Hitachi High-Tech’s measurement and analysis

systems and Hitachi’s digital technologies such as AI and data

analytics etc.

1

2

3


Strengthening Lumada

8

SemiconductorMedical

Electron

MicroscopesClinical AnalyzerPretreatment

Equipment (Hitachi)

Machine / Measurement data

(1B CD-SEM images per annual)

SimulationAI AutomationData Analytics

×Enhancement in

product quality

Shorter product

development cycle

Improving

profitability Easy & accurate

diagnosis

Better

medical care

Improving

the QoL

Further strengthen Lumada in healthcare and industry fields by integrating

measurement and analysis technologies and digital technologies such as AI and

data analytics technologies

Measurement and Analysis Systems of Hitachi High-Tech

×

Machine / Testing data

(20B clinical chemistry and immunodiagnostic

analyses per annual)

CD-SEM

Review-SEM

Industrial

Material Testing

Equipment

Railway Inspection

Equipment


Strengthening Healthcare Business

9

Machine Data

Testing Data

Medical Data

Medical Expenses Data

Life Data

Genetic Data

Cellular Data

Molecular Data

+

LAS : Laboratory Automation System

TAM : Total Addressable Market

PHM : Population Health Management

PBT : Particle Beam Therapy

Step 1

・Acquisition of LAS Market

(TAM ～US$4B)

・Expansion of co-creation

with existing customers

Step 2

・Entry to PHM Market in

North America (TAM US$15～20B)

・Expansion of Investment

for Growth

Step 3

・Development of cell cultivation /

testing market (TAM ～US$50B)

・Strengthening R&D related PBT

and cell

+

+Optimization of

Medical Care

Spread of

Advanced Medical Care

Improvement of

Testing Efficiency

PatientsMedical Institutions /

Insurance Companies

Testing Laboratory

Deeply committing to the improvement of QoL through advanced medical care based on

data utilization setting in-vitro diagnostics devices businesses (No.1, globally) and particle

therapy systems as the core of the businesses and continuing to invest in and strengthen

the business


Hitachi’s procurement function

Utilization of Human Resources and Strengthening Global Procurement Functions

10

Hitachi High-Tech’s procurement function

Optimization of indirect / direct

material procurement

・Sharing the common tasks and expanding

outsourcing

・Process improvement

Fully utilizing human resources of Hitachi High-Tech in

Social Innovation Business

・ Expansion of global market development

Expanding sales and marketing activities through collaboration between Hitachi

and Hitachi High-Tech

Strengthening global procurement functions

・ Streamlining and optimizing Hitachi group’s procurement functions by

utilizing Hitachi High-Tech’s procurement functions

Planning and execution of

global procurement strategy

・ Enhancing procurement process from

upper streamline

Improvement of strategyand front capabilities

Enhancement of streamlining

P2P (Procure to Pay) FunctionS2C (Source to Contract) Function


*1 Number of shares equivalent to Hitachi ownership of 66.7% in voting rights. Minimum number of shares and number of shares to be purchased are both based on the number of shares

based on Hitachi High-Tech’s second quarter report dated November 8, 2019, but will both be re-calculated based on third quarter report in case report is released before the

commencement of the tender offer

*2 Excluding the common shares owned by Hitachi and Hitachi High-Tech’s own shares

*3 Number of shares to be purchased 66,390,170 × 8,000 yen

Overview of the Transaction

・ Hitachi’s Full Acquisition of Hitachi High-Tech through a

Tender Offer etc.

–Tender Offer price：8,000 yen per share

Transaction

Overview

・ Number of Shares to be Purchased：66,390,170 shares

（Minimum：20,548,181 shares*1, Maximum：ー）

–Hitachi will acquire all of the Target Common Shares

through the Tender Offer*2

Number of

Shares to be

Purchased

・ Hitachi High-Tech（TSE 1st Section：TSE 8036）Target

・ Approx. 531.1B yen*3Transaction

Value

Premium to the prior day’s closing price：

Premium to 1-month average closing price：



Announcement

（2020/1/31）

+3.4%

+2.0%

+8.4%

+19.4%

+68.4%

+69.6%

+71.9%

+87.3%

Speculation News

（2019/6/7）Premium to Tender Offer price


Rationale from Financial Strategy

・Plan to use cash on hand and borrowings for 2.0~2.5 trillion yen

investments for the growth including this transaction

− Lowering cost of capital by utilizing financial leverage

Source of

Investment

・D/E ratio will temporarily exceed 0.5x at the end of FY2020 due to

the consecutive investments, but will maintain our policy to keep

D/E ratio less than 0.5x and secure financial stability

Financial

Stability

・A part of 2.0~2.5 trillion yen investments for the growth set out in

2021 Mid-term Management PlanRationale


・ Announcement of Tender OfferJanuary 31

Schedule of the Transaction

February 17 ・ Commencement of Tender Offer Period

April 6 ・ End of Tender Offer Period

April 13 ・ Commencement Date of Settlement

～July・ Scheduled Date of Making Hitachi High-Tech a Wholly

Owned Subsidiary


Cautionary Statement

Certain statements found in this document may constitute “forward-looking statements” as defined in the U.S. Private Securities Litigation Reform Act of 1995. Such “forward-looking statements” reflect management’s current views with respect to certain future events and financial performance and include any statement that does not directly relate to any historical or current fact. Words such as “anticipate,” “believe,” “expect,” “estimate,” “forecast,” “intend,” “plan,” “project” and similar expressions which indicate future events and trends may identify “forward-looking statements.” Such statements are based on currently available information and are subject to various risks and uncertainties that could cause actual results to differ materially from those projected or implied in the “forward-looking statements” and from historical trends. Certain “forward-looking statements” are based upon current assumptions of future events which may not prove to be accurate. Undue reliance should not be placed on “forward-looking statements,” as such statements speak only as of the date of this document.

Factors that could cause actual results to differ materially from those projected or implied in any “forward-looking statement” and from historical trends include, but are not limited to:

economic conditions, including consumer spending and plant and equipment investment in Hitachi’s major markets, particularly Japan, Asia, the United States and Europe, as well as levels of demand in the major industrial sectors Hitachi serves;

exchange rate fluctuations of the yen against other currencies in which Hitachi makes significant sales or in which Hitachi’s assets and liabilities are denominated;uncertainty as to Hitachi’s ability to access, or access on favorable terms, liquidity or long-term financing;uncertainty as to general market price levels for equity securities, declines in which may require Hitachi to write down equity securities that it holds; fluctuations in the price of raw materials including, without limitation, petroleum and other materials, such as copper, steel, aluminum, synthetic resins, rare metals and rare-earth

minerals, or shortages of materials, parts and components; the possibility of cost fluctuations during the lifetime of, or cancellation of, long-term contracts for which Hitachi uses the percentage-of-completion method to recognize revenue from

sales; credit conditions of Hitachi’s customers and suppliers; fluctuations in product demand and industry capacity;uncertainty as to Hitachi’s ability to implement measures to reduce the potential negative impact of fluctuations in product demand, exchange rates and/or price of raw materials or

shortages of materials, parts and components;uncertainty as to Hitachi’s ability to continue to develop and market products that incorporate new technologies on a timely and cost-effective basis and to achieve market acceptance

for such products;uncertainty as to Hitachi’s ability to attract and retain skilled personnel; increased commoditization of and intensifying price competition for products;uncertainty as to Hitachi’s ability to achieve the anticipated benefits of its strategy to strengthen its Social Innovation Business;uncertainty as to the success of acquisitions of other companies, joint ventures and strategic alliances and the possibility of incurring related expenses;uncertainty as to the success of restructuring efforts to improve management efficiency by divesting or otherwise exiting underperforming businesses and to strengthen

competitiveness; the potential for significant losses on Hitachi’s investments in equity-method associates and joint ventures;general socioeconomic and political conditions and the regulatory and trade environment of countries where Hitachi conducts business, particularly Japan, Asia, the United States and

Europe, including, without limitation, direct or indirect restrictions by other nations on imports and differences in commercial and business customs including, without limitation, contract terms and conditions and labor relations;

uncertainty as to the success of cost structure overhaul;uncertainty as to Hitachi’s access to, or ability to protect, certain intellectual property;uncertainty as to the outcome of litigation, regulatory investigations and other legal proceedings of which the Company, its subsidiaries or its equity-method associates and joint

ventures have become or may become parties; the possibility of incurring expenses resulting from any defects in products or services of Hitachi; the possibility of disruption of Hitachi’s operations by natural disasters such as earthquakes and tsunamis, the spread of infectious diseases, and geopolitical and social instability such

as terrorism and conflict;uncertainty as to Hitachi’s ability to maintain the integrity of its information systems, as well as Hitachi’s ability to protect its confidential information or that of its customers; anduncertainty as to the accuracy of key assumptions Hitachi uses to evaluate its employee benefit-related costs.

The factors listed above are not all-inclusive and are in addition to other factors contained in other materials published by Hitachi.

14


Disclaimers

[Soliciting Regulations] This document is intended to announce the tender offer referred to in this document (the “Tender Offer”) to the general public and is

not intended to solicit an offer to sell any securities. If a shareholder wishes to tender his or her shares, each shareholder is requested to exercise his/her own

judgment after carefully reading the explanatory statement concerning the Tender Offer. This document is not, and does not constitute any part of, an offer

or solicitation of sales, or a solicitation of purchase offer, of securities. Publication of this document (or any part of it) or the fact of its distribution does not

provide a basis for any agreement pertaining to the Tender Offer, and it may not be relied upon when executing any such agreement.

[Regulations of the United States] The Tender Offer is to be conducted in accordance with the procedures and information disclosure standards prescribed in

the Financial Instruments and Exchange Act in Japan. Such procedures and information disclosure standards are not necessarily the same as the procedures

and information disclosure standards in the U.S. In particular, Section 13(e) and Section 14(d) of the U.S. Securities Exchange Act of 1934 (as amended, the “U.S.

Securities Exchange Act of 1934”), and the rules prescribed thereunder do not apply to the Tender Offer, and the Tender Offer does not conform to those

procedures and standards.

The financial statements contained in this document have not been prepared in accordance with U.S. accounting standards; accordingly, such financial

statements may not necessarily be equivalent to those prepared in accordance with U.S. accounting standards. Moreover, as Hitachi is a company

incorporated outside of the U.S. and some of its directors are non-U.S. residents, it may be difficult to enforce any rights or claims arising under the U.S.

federal securities laws. In addition, it may not be possible to commence legal actions against a non-U.S. company or its directors in a non-U.S. court on the

ground of a violation of the U.S. securities laws. Furthermore, a company incorporated outside the U.S. and its subsidiaries and affiliates may not necessarily

be compelled to submit to the jurisdiction of U.S. courts.

Unless otherwise provided, all procedures for the Tender Offer shall be conducted entirely in the Japanese language. Some or all portion of the documents

relating to the Tender Offer are or will be prepared in the English language. However, should there be any inconsistency between the document in English

and that in Japanese, the Japanese document shall prevail.

This document contains “forward-looking statements” as defined in Section 27A of the U.S. Securities Act of 1933, as amended, and Section 21E of the U.S.

Securities Exchange Act of 1934. Due to any known or unknown risks, uncertainties, or any other factors, it is possible that actual results may substantially

differ from the projections, etc. as expressly or implicitly indicated in any “forward-looking statements.” Neither Hitachi nor any of its affiliates gives any

assurance that such projections, etc. expressly or implicitly indicated in any “forward-looking statements” will result in being correct. The “forward-looking

statements” in this document have been prepared based on the information held by Hitachi as of the date of this document, and unless otherwise required by

applicable laws and regulations or rules of financial instruments exchange, neither Hitachi nor any of its affiliates is obliged to update or modify such

statements in order to reflect any events or circumstances in the future.

Hitachi, the financial advisor to Hitachi High-Tech and the tender offer agent, and their respective affiliates, may, within their ordinary course of business and

to the extent permitted under the related Japanese financial instruments and exchange laws and regulations, purchase or take actions to purchase common

stock of Hitachi High-Tech for their own account or for their customers’ accounts outside the Tender Offer prior to the commencement of, or during, the

period for purchase, etc. in the Tender Offer in accordance with the requirements of Rule 14e-5(b) under the U.S. Securities Exchange Act of 1934. If any

information concerning such purchase, etc. is disclosed in Japan, disclosure of such information will be made also in the U.S. through similar means of

disclosure.

[Other Countries] In certain countries or regions, the announcement, issue or distribution of this document may be restricted by laws or regulations. In such

cases, please note and comply with such restrictions. Regardless of whether this document is received in any such countries or regions where the

implementation of the Tender Offer is unlawful, this document does not constitute any solicitation of an offer to sell or offer to purchase securities including

share certificates concerning the Tender Offer, and is being distributed merely for informational materials.

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